APPLICATION OF CISG: Yes. "The Vienna Convention being ratified in Italy, it is therefore decided to apply it where the parties agreement does not provide for any solution, in respect of the present dispute."

ICC arbitration award
Case No. 8716 of February of 1997

Facts. This dispute concerned the payment for goods ordered through an agent. The Respondent [buyer] refused to take delivery of the goods shipped to it by the Claimant [seller] due to cancellation of orders by the [buyer]'s customers. Alternatively, the [buyer] proposed different terms of payment to which the
parties were unable to agree. Pursuant to the arbitration clause of the agency agreement, the seller
commenced these proceedings seeking payment for the goods or alternatively reimbursement for the cost
of returning the goods to origin. The arbitrator first considered her jurisdiction over the matter given that
the claim arose from an isolated incident involved in a long-term contract (the Agency Agreement), which
included the arbitration clause.

The arbitrator's jurisdiction. The "Agency Agreement" between the [seller] and the [buyer] provided that the [buyer] agreed to act as an agent of the [seller] in Israel. Article 6a of that Agreement stated:

"All disputes, controversies or differences which may arise between the parties out of or in connection
with this agreement or the breach thereof shall be referred and settled by the arbitration court of the
International Chamber of Commerce in Paris in accordance with the respective provisions of rules and
by-laws of the said arbitration court.
"The award to be rendered shall be final and binding upon both parties."

Since the dispute arose out of an individual contract for the sale of goods in lieu of the "Agency
Agreement", despite the contention by the [seller] that the latter Agreement purported to be the basis of all
commercial transactions between the parties, and thus the jurisdiction of the arbitrator need first be
determined. The arbitrator determined that she did have jurisdiction over this dispute since the sale of
goods contract had been signed during the validity of the Agency Agreement, Article 7 of which set out
that "all relations between the parties fall under this agreement."

Application of the Convention and Incoterms. The terms of the Agreement are binding on the parties,
based not only on the general principle in international business (pacta sunt servanda) but also on the
legal obligations as expressed in the relevant concerned legal systems. The parties had expressly referred
to these systems by agreeing on an "ex-work" sale. [page 62][**]

It was determined that the CISG would apply to this dispute. The parties had not expressed a choice of
law to govern the contract however had clearly agreed to an international sale of goods in which they refer
to the "Ex Work" Incoterm. The choice of this Incoterm expresses a localization of the performance of the
contract to the location where the seller is located, namely Italy. Since Italy has ratified the CISG, the
parties could reasonably have expected that such system would apply to the subject contract.

Obligations of the parties.The [seller] had substantially completed its obligations under the contract by
shipping the goods thereby obligating the [buyer] to perform its two obligations: 1) payment for the goods,
and 2) taking delivery of the goods. [Buyer] did neither.

Damages. Although the contract did not provide for sanctions and remedies, damages could be considered
in light of Arts. 53, 54 and 74 CISG to award damages. In particular, Art. 74, which gives the right for an
aggrieved party to be compensated for any predictable damages arising out of the fundamental non-performance of a contracting party.

Since the [buyer] did not dispute that the [seller] had completed its obligations under the contract, [buyer]
was required to perform its obligations. When it did not do so, the [seller] was entitled to compensation
for predictable damages pursuant to Article 74. The arbitrator awarded that the [buyer] pay the cost of
goods to the [seller] but did not award the cost for return shipment, since this latter damage was claimed
merely as an alternative.

Interest. Interest was awarded at a rate of 5%, the rate in force in Italy at the time of the award, running
from the time when the [seller] put the [buyer] on notice to fulfill its obligation until payment was made
by the [buyer] in full. [page 63]